Congratulations on landing your first job! Now that you’re earning a living, it’s time to be proactive in taking care of your insurance. A healthy insurance portfolio protects your most precious assets in the event of death, disability or illness. Read on to learn three essential ways to protect yourself and your loved ones.
1. Get a life insurance check-up.
Life insurance is an uncomfortable topic. However, with average funeral costs surpassing $7,000, your loved ones will have to bear that financial burden if you don’t plan ahead. Also, not all debt is discharged when you die, including some private student loans. If you had a cosigner on a loan, you’ll want to check into that and protect that person from your debt with a life insurance policy. Plus, the sooner you get it, the better, as buying life insurance while you’re young allows you to lock in affordable rates.
Employer-provided life insurance, which is often one to times your salary, may not be sufficient. Many experts suggest purchasing coverage equal to seven to 10 times your annual income. To find out how much coverage you need, calculate your total debt from mortgages, student loans, credit cards and other obligations, add in expected funeral costs and factor in the cost to provide for any dependents. Or you can use this easy online Life Insurance Needs Calculator.
Keep in mind that life insurance can offer more than just a death benefit. If you step up from a term policy to a permanent policy that accumulates cash value, you’ll also enjoy “living benefits” of life insurance such as:
- premium payments that act, in part, as a savings vehicle
- the option to borrow against cash value to pay off student loans, finance a wedding or buy your first home
- using the cash value to save for retirement
2. Close income gaps with disability insurance.
The Social Security Administration reports that the average 20-year-old worker faces a one-in-four chance of becoming disabled some time before the age of 67. Despite this sobering statistic, just one-third of American workers carry long-term disability coverage. Disability insurance provides a source of steady income should you become ill or injured and unable to work. If your employer offers this coverage, examine the policy carefully to make sure it meets your needs. Ideally it should contain:
- coverage for 50% to 70% of your income
- accident and illness protection
- long-term disability coverage
- no annual caps
- benefits for partial and full disability
3. Cover your health.
If your job doesn’t provide health insurance, it is crucial that you get coverage. In fact, it’s the law. Even if you’re young and healthy, affordable coverage under the new health care law protects you with annual out-of-pocket maximums and no lifetime limits on benefits. Without health coverage, a single accident or illness could wipe out your life savings or plunge you into debt. You have lots of choices, so shop around with private insurers or visit the federal health insurance marketplace to compare your options.
As a new member of the workforce, you have the power to protect your health, finances and loved ones. A little time spent choosing the right insurance coverage goes a long way toward providing peace of mind and comfort in the event of challenging times.